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For things to work, all process must be in place

By: Asif Merchant

Published : Sep 2015

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It was in 1987 that Asif Merchant
got into the business of wholesaling of footwear. He bought from small
factories and sold to the big brands of Mumbai, but could not find the success
he yearned for. In 1989 he set up an unauthorised portable structure at Breach
Candy, and then found a shuttered property under the Kemps Corner flyover. He
managed to raise the Rs 18 lakh needed, and Catwalk was launched in 1990 with a
unique proposition: pay as you like. Merchant bought out the majority shares
and friendly loans and set up Catwalk Worldwide Pvt Ltd to provide affordable
and disposable fashion in 2001. Since then it has been a success story, with
Catwalk registering consistent growth. Merchant talks about 'Make in India' and
shares his Catwalk experience in the context.

For entrepreneurs in the business
of Fast & Forward Fashion (FFF), the initial conditions one would face
while working towards a 'Make in India' will be harsh. With infrastructure
being what it is, things will be extremely difficult for early movers, who of
course will eventually benefit the most in the long run.

For things to work, an
organisation will need to be technology-backed and must have robust processes
with Just in Time (JIT) and Just in Case (JIC) incorporated into scheme of
things. These would be the key differentiators among local players, and would
be in sync with globally accepted norms too. Moreover, the FFF industry demands
a minimal lead time, and a brand cannot afford to be stuck with outdated
inventory. Faltering on these counts would inevitably flare up the costs.

The entire zero deficiency
objective of getting saved from "currency volatility" and
"import's direct costs" will come to nought the moment any of the
above requirements entail manual interventions. Therefore, the following
processes have to be incorporated as per the global industry standards.

Process
descriptions

The JIT process is meant to take
on any global giant, and beat him at his own game with additional margins
earned from 'Make in India', besides the geographical and cultural knowhow
required:

Ensuring timely sourcing from national and international
certified component manufacturers with a track record of timely supplies of
quality products;

'Make in India' will be the
beneficial way forward for any Indian entrepreneur.

Huge losses may be
incurred due to currency fluctuations as seen during FY 2013-14. These result
in losing out on margins and non-viability of replenishments, and have to be
offset through further deep discounting. In case of an MNC with deep pockets,
the above concerns could just be another case of establishing cost. MNCs can
factor it out in the way it happened in case of Levi's or Kellog's, which took
them 19 years to break even. Zara, despite being in the same industry, clocked
a 54 per cent growth in the same year and remained highly profitable only due
to the smart partnership with the Tatas. The enterprise had deep pockets to
strategise the growth, with the brand already having decades of an established
inventory management model, showing the utmost need of incorporating robust processes.

In this crisis situation, the
'Make in India' initiative remains the only smart way forward for Indian
entrepreneurs fighting multinationals who are hanging on with deep pockets and
thereby affording longer periods to break even.

The
Catwalk case

Catwalk had started backward
integration with the yet-to-be-launched 'Make in India' project in 2013-14 with
the slogan of "Baadha sabhi hatayenge, joota yahin banayenge" (We
will remove all obstacles, we will make all shoes here). This went haywire because
of overestimating the infrastructure conditions, when it was realised that the
SOP implementation for achieving this was unworkable in the current system.
Hence, the brand suffered a negative growth of 9.32 per cent in FY 2013-14 over
the previous year.

In fact, FY 2014-15 too
had a similar impact on bottom lines with revenues showing only a minor growth
of 4.67 per cent over FY 2013-14, and still had a negative growth of 5.08 per
cent over FY 2012-13. Determination and belief were the only factors that
stopped us from giving up on the mission.

In the first 12 weeks of FY
2015-16, Catwalk saw itself finally taking off on a growth trajectory - this
time with better margins and having absolute control on the entire supply chain
with fully integrated systems and processes in place. This also offered a
glimpse of success into the organisation's vision statement of "Affordable
& disposable fast fashion" with the following upsides:

1. Better
control on the production processes

Seasonal fashion developed with a shorter lead time;

Quality control to accessible locations other than
overseas;

Cost kept well under control in spite of inflation giving
better margins;

Eliminating probabilities of forex fluctuations, and
incorporating the advantages of stable and scalable purchasing with consistent
and maintained margin structures.

2. Better
product leading to reflecting into improved sales figures

Reasonable same store growth in these tiring times;

Discounting elimination in peak season owing to built-in
confidence by improved fill rates;

Catching up with lost market share.

3. Controlled
inventory management due to

Improved lead time for efficient replenishments with small
on-hand inventory;

Slashed inventory as 32 NWC (net week cover) compared to
41 NWC same time last year;

Lowered input cost benefitting from backward integration;

Flexibility of producing in excise-free zones propelling
margins to new heights.

The above upsides did help
Catwalk to think optimistically and consistently work on the processes.

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